FanDuel has reached out to its users for help to prevent a proposed tax hike on Illinois’ sports betting industry.
Gov. JB Pritzker has recommended an increase in taxing Illinois sports betting operators from the present 15% to 35% of sportsbook revenue, which is expected to create additional revenue of $200 million for the state of Illinois.
FanDuel Issues Alert
According to an in-app notification issued by FanDuel Illinois, the company has urged users to protest against the tax hike. The alert, recently issued to customers, read:
“STOP THE SPORTS BETTING TAX HIKE! We NEED your HELP! The Illinois legislature wants to MASSIVELY increase the tax rate on your favorite form of entertainment—placing bets on the teams, players, and games that you love! Use the link below to tell Governor Pritzker and your state representatives to say NO to a sports betting tax hike.”
FanDuel has expressed clear displeasure at the tax increase in Illinois, a state where sports betting operators have already generated more than $2.5 billion in revenue since the start of sports wagering in March 2020. FanDuel’s CEO, Amy Howe, suggested that increasing taxes kills a competitive industry and pushes customers to overseas and black markets.
“Our government affairs teams do a really good job of trying to educate the regulators on how to get that balance right, because at the end of the day, the revenue to the state is really important,” FanDuel CEO Howe told Legal Sports Report last week.
“But also, if that tax rate becomes too high, then it shuts down competition. And has some unintended consequences of pushing consumers back to the black market. Which, ultimately, is not in the best interest of the state or consumers. So it’s about threading that needle. And it’s partly on us to make sure that we can work with state regulators to educate them on how to get that balance right.”
Pritzker’s Proposal
In February earlier this year, Pritzker suggested raising taxes for Illinois’ sports betting industry. His $52.7 billion budget proposal included more than doubling the tax rate to 35% for sports betting operators in the state.
“I wish we had big surpluses to work with this year to take on every one of the very real challenges we face,” Pritzker said. “It’s important to note that while this budget is tight this year, our fiscal house is in order, and we are able to keep our commitments to the people of Illinois.”
What Have Other States Done?
Several other states in the USA have considered increasing tax revenue by hiking tax rates for sports betting operators. Ohio has already doubled the tax rate on sports betting from 10% to 20%.
Last month, New Jersey brought in a bill with a proposal to increase the sports betting tax rate from 14.25% to 30%. New York presently has the highest tax rate in the country at a staggering 51%.
In January last year, DraftKings CEO Jason Robins said operators have no choice but to pay any tax rate that a state like New York proposes but that brings a long list of demerits to the healthy functioning of the industry.
“Operators, who were understandably excited about New York opening up, were focused far more on customer acquisition in the short term and far less on what would create a sustainable market over time,” he said.
Illinois Sports Betting Revenue Grows
Illinois is one of the strongest and most robust sports betting states in the USA. In 2022, Illinois generated $9.74 billion in total handle with revenue of close to $800 million for the state’s betting operators. Tax revenue for 2022 was close to $120 million.
Those metrics were surpassed by a strong 2023, in which Illinois collected well over $10 billion in revenue. The state has collected at least $1 billion in sports betting handle in each of the last six months. Tax revenue in this period peaked in January this year, in which Illinois collected $21.6 million.
Illinois has collected close to $2.3 billion in handle in the first two months of 2024, with tax revenue of more than $35 million. These are substantial numbers in one of the most active sports betting markets in the country. A tax hike rate would bring in significantly more revenue to the state but could also adversely impact operators’ bottom lines in the region.
